Mortgage Refinance Guide

If you are in the market to refinance your home loan and came to this site looking for information about mortgage lenders, there are several things you need to know to avoid paying too much for your next mortgage loan. The first thing you need to know is that with the exception of bank originated mortgage loans, home loans in the United States are retail products and therefore you will pay retail markup by the person arranging your loan.

You might think “I’ll just go to a bank to avoid this markup…” However, because banks fund their loans with their own money they are exempt from legislation in the United States that required mortgage lenders to disclose their markup making it impossible for you to get the best deal possible from your bank. Here are several tips to help you find the best information about mortgage lenders and save thousands of dollars on your next mortgage loan.

Mortgage Rate Markup

It’s a little known fact in the United States that mortgage loans are marked up by the person arranging the loan for a commission. In the Industry the commission on this markup is called Yield Spread Premium and many brokers conveniently leave the markup off their Good Faith Estimates when quoting you a loan. Mortgage Brokers are required by the Real Estate Settlement Procedures Act to disclose their markup on the HUD-1 Settlement Statement; however, many brokers have clever ways of hiding this markup and the commission the lender pays them.

Yield Spread Premium 101

Suppose you are refinancing your home for $275,000. The broker quotes you a mortgage rate of 6.75% and charges you an origination fee of 2.5% for the loan. The origination fee is what the broker discloses as their fee for arranging your loan and in this case you’ll be charged $6,875 at closing. It’s not uncommon for mortgage brokers to charge as much as 3-4% for the origination fee which if you follow the system found in the free videos on this site you can refinance your home for a flat 1% origination fee. What the mortgage broke isn’t telling you is that your lender actually approved you for a 6.25% interest rate and they’ve marked it up to 6.75% for their commission.

Mortgage lenders pay brokers one percent of your loan amount for every .25% they overcharge you on the mortgage rate. That’s right; in this example the broker pockets an additional 2% of your loan amount for overcharging you. You’re already paying the broker $6,875 for arranging your loan, but the broker pockets another $5,500 at your expense. You get stuck paying $173 more every month in this example just to pay for the mortgage broker’s “extra commission.”

The Best Information About Mortgage Lenders Is Free

The good news for you is that you can avoid this unnecessary markup of your mortgage rate and get the monthly payment that you deserve. The free videos provided on this website show you how to refinance your home loan without paying commission based markup with a flat 1% origination fee. You’ll save thousands of dollars each and every year that you keep the loan. Register today…the videos are yours fee with no strings attached.

Don’t let bad credit stop you from refinancing your home loan. There are many options available making it possible for you to refinance and even get cash back.. Even if you have a history of foreclosure and bankruptcy on your credit report, you still have options.

You do need to realize that with bad credit you will not get the same types of loans or mortgage rates as someone with perfect credit would, but it is still possible for you to receive a fair deal. The very first thing that you will need to do is to get copies of your credit reports. Your credit score derived from these reports will be a big factor in determining the loan and the mortgage rates that you can receive.

Normally, the lower your credit score is, the higher your mortgage rate, closing cost and origination fees can be. Since this is such a big part of determining what your interest rate and the type of loan will be, you want your score to be as high as possible. There are steps you can follow that will allow you to improve your credit score fairly quickly. You will not be able to make a lot of improvements in a short amount of time; however, every little bit will help.

Review your income and debts to see how much income you would actually have left to pay on a home loan. This is an important step and it is imperative that you do not leave out anything that you pay on. You should even consider the amount of money you spend on gas, food and other necessities to have an accurate figure. This will give you an idea of how the lenders will review your loan application. If your income is not high enough to actually pay back a loan, then you could be denied. On the other hand, if you have adequate amount of income you have a very good chance of getting a home loan.

Keep in mind that the less you borrow when refinancing the lower your monthly payments will be and it can also reduce the rates you will be charged. You’ll need to factor this into your decision to take cash back at closing. Even though you can expect to pay a little more for your home loan if you have bad credit, you still shouldn’t take the first offer you receive. Shop around a little and compare lenders to make sure you are receiving the best loan available. There are some lenders that will take advantage of people with bad credit and others that will offer reasonable rates for your loan.

If you are looking for a mortgage company for your South Carolina home loan there are several things you should know about rate quotes before choosing one. The rate quotes you receive on the Internet and from your South Carolina mortgage companies all include commission based markup that could result in overpaying thousands of dollars every year you keep the loan. Here are the basics you need to know about mortgage rates before choosing a mortgage company in South Carolina to purchase or refinance your home.

The commission based markup of your mortgage rate is the industries dirty little secret. Your mortgage company tells you that you qualified for a specific interest rate when you actually were approved for a much lower rate. South Carolina mortgage companies do this because the lender behind the loan pays them a commission for overcharging you. This commission is called Yield Spread Premium and according to the Secretary of Housing and Urban Development is responsible for homeowners in the United States overpaying sixteen billion dollars every year.

How Yield Spread Premium Works

Suppose you purchased your South Carolina home for $350,000 and qualified for a 7% mortgage rate. You used a traditional fixed rate mortgage to purchase your home with a 30 year term length and your payments have been $2,328 but what you don’t know is that you actually qualified for a 6.25% interest rate and the mortgage company marked it up to get a bonus from the lender. Your mortgage company charged you a fee from originating your loan and then took a kickback from the lender of 3% of your loan amount for overcharging you.

If you had purchased your home at 6.25% instead of 7% your mortgage payment would have been only $2,155. The first year you had your home you threw away $2,076 because your South Carolina mortgage company lied to you about your rate. After just five years you’ve thrown away $10,380! Can you see why choosing a mortgage company that does not include Yield Spread Premium with your loan is the most important aspect of the new mortgage?

Yield Spread Premium Can Be Avoided

When you avoid this unnecessary markup of your mortgage interest rate you have the ability to refinance with wholesale mortgage rates. Doing this for yourself is easier than you think…you just need to find the right mortgage company or broker for the job. You can refinance your South Carolina mortgage with a wholesale mortgage rate and only pay a one percent fee to your mortgage company or broker if you know how to go about this. To learn more about finding the right South Carolina mortgage company and avoiding junk fees, register for my free video tutorial.

Most homeowners don’t understand how their mortgage broker is paid for the work they do arranging a home loan. Brokers are compensated for their work from two sources; understanding how this compensation works will help you avoid paying too much for your next mortgage loan. Here are several tips to help you understand how mortgage brokers overcharge people to boost their commissions.

What is YSP?

YSP or Yield Spread Premium is a fee paid by the wholesale lender when your broker locks and closes your mortgage with an above market interest rate. Lenders reward mortgage brokers for overcharging because these loans bring a premium profit when sold to investors. The amount of Yield Spread Premium depends on how much your broker overcharges you. For every .25% you agree to overpay the broker’s “kickback” is 1% of your loan amount.

Suppose you are refinancing your home loan for $250,000. The broker quotes you a rate of 6.75% but doesn’t tell you that you’ve qualified for 6.0%. The spread between what you could have had and what you got is .75% which creates 3% of Yield Spread Premium for the broker. Your broker receives a kickback of $7,500 from the lender for overcharging you…in addition to the origination fee that you’re already paying.

Yield Spread Premium can be hard to spot unless you know what to look for. Many brokers “forget” to list the fee on your Good Faith Estimate. If this is the case the next opportunity you will have to catch it is on the rate lock confirmation from the wholesale lender. Make sure the confirmation you receive after locking your rate comes from the lender and not the broker…many brokers provide rate lock confirmation typed up on their own letterhead. If you get a rate lock confirmation typed up on the broker’s letterhead you do not have proof of anything…let alone guaranteeing your mortgage rate.

Your last opportunity to catch Yield Spread Premium before closing on your new mortgage will be on the HUD-1 statement. The fee is usually listed around lines 810-811; however, you may find it further down. It is often called “mortgage broker rebate” or “YSP paid to broker.” If you find this on your HUD-1 statement you have a mortgage rate that includes commission based markup.

The Perfect Mortgage Loan

Most homeowners don’t know what a good mortgage deal looks like. It is possible to get a wholesale mortgage rate without Yield Spread Premium and pay a one percent origination fee to the broker. You can learn more about refinancing your home with a wholesale mortgage rate while avoiding junk fees by registering for my free video tutorial.

Many homeowners have a difficult time choosing which type of loan is best when refinancing their homes. Taking out a new 30 year fixed rate cookie cutter mortgage every time you refinance may not be the best move for your situation. Here are several tips to help you make sense of the different mortgage products available and choose the right loan for your situation.

How Long Do You Plan on Keeping Your Home?

The first question you need to answer when deciding to refinance is how long you plan on keeping your home. Because there are expenses involved when taking out a new mortgage loan you will need time to recoup this money. If you sell your home prior to recouping this expense you will lose money by taking out a new loan. You can easily determine your breakeven point by dividing the amount you will pay in fees and closings costs by how much lower your monthly payment will be. This will tell you the number of months it will take to recoup your refinancing expenses with the lower payment amount.

What Interest Rate And Term Length Should You Choose?

Choosing a 30 year fixed rate loan when refinancing is not a good idea for most homeowners. Refinancing your mortgage with a 15 year loan allows you to build equity in your home at a much faster rate. Choosing an adjustable rate loan could allow you to take advantage of lower mortgage rates. Mortgage interest rates are still very low; however, you should weigh your tolerance for financial risk before choosing a mortgage with a variable interest rate.

What Are Your Objectives For The New Mortgage Loan?

Do you need a loan with the lowest possible payment or would you like to pay the mortgage off as quickly as possible? If you can tolerate a fair amount of financial risk and need the lowest possible payment an interest only adjustable rate mortgage could be right for you. Interest only mortgages have payments based only on the amount of interest due in a given month; however, these mortgages do not remain interest only forever. At the end of the interest only period your lender will recast your loan to a standard Adjustable Rate Mortgage amortized for the time remaining in your loan term

Amortized? What Does That Mean?

Amortization is just a fancy word for describing how your mortgage balance is paid down over time. Mortgage loans are front loaded with interest so at the beginning of your loan the majority of your mortgage payment is applied to the finance charges. Over time this reverses as the interest is paid down and more of your payment is applied to the loan balance. Because mortgage loans are front loaded in this manner it is best for you to find the lowest rate possible when refinancing. You can do this by avoiding broker markup of your mortgage rate and other garbage fees.

You can learn more about how to refinance a mortgage by registering for our free video tutorial. The videos are yours free and will show you how to save thousands of dollars refinancing your home with a wholesale mortgage rate while avoiding garbage fees.